Shares of Rexahn Pharmaceuticals (RNN) continued to show considerable volatility on Tuesday and Wednesday, making a late run to end Tuesday’s trading session then swinging from positive to negative on Wednesday. This comes only just over two weeks after the lead-up to the company’s presentation at the 16th Annual BIO CEO & Investor Conference caused big gains followed by a rapid swing to losses.
Late Run, Gap Up, Big Sell-Off
Tuesday’s trading had found Rexahn enjoying a modestly strong day, with shares climbing about 7 percent from $1.11 apiece to $1.19 on strong volume. However, at almost 3:30 EST exactly, the stock started to take off, soaring another 8.4 percent in just an hour with a heavy spike in volume to close at $1.29 for a gain of 16.2 percent on the day.
Speculation in some circles appeared to point to pending news driving gains, and closing above $1.20 appeared to break a psychological barrier for some that had been in place since the stock spiked to close at $1.60 on Jan. 13 before retreating just as rapidly.
After gaining in after-hours trading, shares opened up on Wednesday morning, gapping up almost 4 percent to $1.34 to start the day and climbing as high as $1.40 a share on extremely heavy volume. However, at 11 am, the stock abruptly turned south, shedding value rapidly and bottoming out at $1.21, down 7 percent.
Shares began regaining ground, ultimately getting back to a break-even point of $1.29 at noon.
This small-cap pharma has clearly remained a focal point for traders, speculators, and investors alike as its average daily volume exceeds 15 million shares. However, its strange trading patterns continue to create some consternation given that lack of news stories that could be driving them.
Big Swings Caused by Rumor Mill, Technical Data or Something Else?
Clearly, speculation that strong news is around the corner isn’t out of place, with three different cancer drugs currently in clinical trials. What’s more, Roth Capital analyst Joseph Pantginis, Ph.D. noted in his Jan. 9 research report that he believes the company would target a partnership for marketing its lead therapy RX-3117 by mid-2014, providing more fuel to the potential rumor mill.
Pantginis was bullish on the stock, initiating coverage with a buy rating and a $3 price target in January, and stating that he felt Rexahn was a “re-focused, re-tooled company with a clear focus on oncology drug development.”
While the reason for Tuesday’s end-of-day buying spree remain murky, the answer for the strong open, crash, and recovery could be simpler. A quick look at the company’s 14-day relative strength index (RSI) shows that the run on Wednesday pushed the company right up to the 70 level, widely acknowledged to be a technical barrier indicating a stock is overbought.
Shares opened above that RSI level and climbed higher prior to the sell-off at 11 am. However, once the stock started to plunge, the RSI levels dropped to 30, recognized as a sign that a stock is oversold. Given that Rexahn is a clear point of interest for traders, and that these basic RSI patterns are simple and easily recognizable, it’s probably unsurprising that the share price started to recover after dipping to that 30 level.
The timing of Rexahn’s big price swings are also curious in just how precise they appear to be. The sell-off that swung the company from a 6.25 percent gain to 5 percent loss in a matter of minutes on Feb. 10 started at exactly 2:30, but this could easily be attributed to the fact that the company’s presentation at the BIO CEO & Investor Conference started at that time.
However, Tuesday and Wednesday’s big swings almost seem too precise to be a coincidence. Tuesday’s big run to end the day started almost exactly at 3:30, and Wednesday’s big sell-off came at 11 am on the nose. While any explanation for this would be pure speculation, and it remains entirely possible that this timing is in fact a coincidence, it wouldn’t be out of the question to consider the possibility that algorithmic trading could be a part of what’s driving these big price shifts. But without any specific news items to point to, and with such heavy volume, a clear explanation for this sort of high-volatility, heavy trading remains elusive.
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